Archive for the ‘create wealth in real estate’ Category

"Fix ’em Up, Rent ’em Out" now available at!

Wednesday, October 17th, 2007

My book “Fix ’em Up, Rent ’em Out: How to Start Your Own House Fix-up and Rental Business in Your Spare Time” is now available at

Editorial Review:
This book teaches how to get started buying, repairing and renting out fixer-upper houses in your spare time. It covers various aspects such as house selection, what to repair, handling tenants, managing the books, and taxes. The book describes the two safest ways to make money in real estate, and one chapter is devoted the “Zen of Repairing Properties.” The author uses illustrations from his own experiences, humor and motivational examples to encourage the reader down a path that will be both financially rewarding and deeply satisfying.

Comments on “Fix ’em Up, Rent ’em Out”:

“Great information for anyone starting out in the fixer-upper business. Easy to understand, written by an author who has served his apprenticeship in the trenches.”
— Fixer Jay P. DeCima, Investor and Author

“Terry Sprouse has created a profitable rental business with his family in their spare time. He’s accumulated more net worth in six years than most people have after a lifetime of saving. What sets him apart is he took action.”
— Bob Zachmeier, Investor, Educator, Author

“Sprouse has created an approach to home restoration and wealth generation that works. This book provides simple guidelines for restoring homes, but also weaves in guidelines for restoring sanity to our crazy lives. Sprouse has the wit of Will Rogers and the business savvy of Donald Trump. His simple, direct, honest philosophy of sustainability and responsibility is profound.”
— M. D. Matlock, Ph.D., P.E., C.S.E., President, American Ecological Engineering Society, Award-winning designer of green neighborhoods for Habitat for Humanity, Professor of Ecological Engineering, University of Arkansas.

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How to Make Money in Real Estate – Stick to the Basics

Friday, September 14th, 2007

One of the surest ways to make money in any endeavor is to follow in the footsteps of other successful people. Astronaut Neil Armstrong followed in the steps of John Glenn. Comic actor Ben Stiller followed in the steps of his show biz parents Stiller & Meara. The same is true in real estate. Plenty of people have gone before us.

Buying lower-priced fixer-upper houses, using your own time & effort to fix them up, and renting them out has been a tested and true path to generate wealth & security.

The four chief benefits of purchasing fix-up houses are:

1) if you buy a house in need of repair, a fixer upper house, you pay less for it than for a house in good shape. Since you paid less, you can take out a smaller loan and have lower monthly payments.

2) By doing repairs yourself (as much as you are able to), you save the money you would have paid others, and you learn new repair skills.

3) By renting it out, you get a house that is constantly increasing in value (by an average 5% per year) the same time the rents are going up.

4) When you get older, your loans will be paid off (or close to it) and the rental income you receive are like a pension for your retirement.

Granted, it is hard work to find a house, make repairs and learn how to deal with tenants. But you also learn valuable technical and people management skills that you can use in other parts of your life, and pass along to others. Mostly, there is a great sense of satisfaction in your accomplishments, a stronger sense of security, and more income, which means more freedom.

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Turn Your Residence into a Rental Property Instead of Selling It

Saturday, August 4th, 2007

One of the Safest and Easiest Ways to Make Money in Real Estate

As mentioned earlier, one way to obtain investment money to purchase fixer-upper houses is by refinancing a house that you already own. Refinancing a house means to take out a new loan on your rental property, or home, that replaces the existing loan.

When purchasing a fixer-upper investment property, you may decide not to sell your principal residence, but instead turn it into a rental property. In this case, the next house that you purchase and live in once again qualifies you for the lower owner-occupied loan rate. This approach also makes it easier to make repairs to the rental house because, having lived there, you know the tricks on how to fix the things that typically need repair.

A system that I like to use is to refinance my residence six months to a year before I plan to buy a new residence. This gives me enough money for a down payment on the next house that I will purchase. When I locate a good fixer-upper I can quickly purchase it. During the 3-4 weeks it takes to close on the new house, I prepare the old house so it will be ready to rent. This usually involves some painting and landscaping. Then, before I close on the new house, the “for rent” sign goes up on the old house.

The 3 steps in this technique:

1. refinance your residence
2. use the refinance money as a down payment to buy a new house
3. move into the new house and rent out the old house

Instead of refinancing your residence, you can use savings or a loan from a relative as a down payment. An advantage of refinancing your residence while you are still living there is that you get a lower interest rate on your loan than if you were refinancing a rental property. Under this technique, you get the lower “primary residence” interest rate for both the old property and the new one, since each property is your primary residence at the time that you take out the loan.

When I did my first refinancing of a townhouse that I owned, I received a rate or 6.1%. The rate for my original loan was 7.5%. The original purchase price was $52,500 but the value had increased to $82,000 ten years later (Table 1). I had also paid off about $10,000 of the mortgage principal over the course of the ten years.

Table 1
Townhouse Refinancing

Original purchase price $52,500
Principal pay down $10,000
Value ten years later $82,000
Amount of equity in house $49,500 (82,000 – 52,500 + 10,000)
Less 20% of value (to avoid PMI) $16,400
Total amount of cash back $33,100 (49,500 – 16,400)

When refinancing, you should keep 20 percent of the value of the house in the house to avoid paying private mortgage insurance and to pay a lower interest rate. After refinancing the townhouse, my monthly mortgage payments went down from $535 per month to $518 per month. Normally, you pay 1 percent extra if you refinance as an investor instead of as an owner occupant. Although with good credit and by shopping around, its possible to have the 1 percent waived. You should time your moves so that you finance before you move out to take advantage of the extra 1 percent discount.

Timing Your Refinancing

Refinancing your mortgage loans is another aspect of real estate that will require you to develop some expertise and close attention to the details of the economy and interest rates. I have heard investors recommend refinancing every chance you get, regardless of interest rates, and to take out as much money as you can. That philosophy is a dangerous because you want to avoid raising your monthly payments beyond the point where you can afford to pay them.

While refinancing is common way for real estate investors to tap into the equity in their houses, you must be careful not to take out a large loan that increases your monthly payments beyond what you take in on rent. If you see that rents are going up in your area and you can increase rents enough to cover the monthly payments on a refinancing, then go ahead and refinance to take some of money out of a house. Ideally, that money is used to purchase more investment property. However, if your rents will not cover the refinancing payments, don’t put yourself in the awkward (and perilous) position of having to lose money every month.

Monitoring interest rates will also help you decide when to refinance. When interest rates are dropping, like they were in the early 2000’s, you were able to refinance a house, take money out, and lower your monthly payments. That was a real estate investor’s dream. As interest rates started rising again in 2005, it required that investors be more cautious in refinancing.

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Start Your Fixer Upper Rental Home Real Estate Business in your Spare Time

Tuesday, June 26th, 2007

Opportunity is missed by most people because it is dressed in overalls and looks like work.
-Thomas Edison

This blog is aimed at the person who has a strong desire to invest in real estate but wants to keep their regular 9 to 5 job. This person, like me, may not start off with a lot of disposable income. My wife and I have to pinch pennies and think long and hard about it before taking the plunge to buy a property. People who posses the extra money can afford to hire professionals to take much of the burden of their shoulders. They can hire attorneys, real estate agents, landscapers, plumbers and electricians.

But for me, the key is to not rely on on the so-called real estate professionals to help you along the way. What I propose is that you learn to do all these things yourself, just as you would learn all aspects of any hobby that you pursue. It is more difficult to do it all yourself, but it is more financially rewarding, more deeply satisfying, and you will learn a wide assortment of skills that will serve you well throughout life.

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